Hoboken University Hospital creditors want more than $10M to allow for its sale

Hoboken University Hospital creditors want more than $10M to allow for its sale

Tuesday, September 20, 2011, The Star-Ledger

Creditors are seeking more than $10 million from Hoboken University Hospital as a part of a broad bankruptcy settlement that would allow for the sale of the cash-strapped facility, according to sources with knowledge of the ongoing negotiations.

However, the city is reluctant to pick up the extra costs, inching the hospital closer to shutting it doors, according to sources who asked for anonymity because they did not want to disrupt ongoing negotiations.

Officials with the creditors committee, the city and its hospital held a seven-hour negotiating session Monday in hopes of settling the bankruptcy dispute before a pivotal hearing on Thursday, according to sources.

The hospital has asked the judge to order a settlement that would give creditors roughly $5 million of the $34 million they are owed — or 15 cents on the dollar. The hospital is also asking the court to block creditors from seeking more money from the city and the Hoboken Hospital Authority, which oversaw the hospital.

Creditors, from unions to medical vendors, Monday said they would agree to settle the bankruptcy if the hospital came up with an additional $10 to $12 million to settle its outstanding bills, according to sources.

City officials reached out to council members opposed to the current hospital sale to see if they would support issuing a bond to cover the additional costs and save the hospital from closing, sources said.

Councilwoman Beth Mason, who has criticized the administration’s handling of the sale, said she would consider issuing the bond if the new buyers agree to a deed restriction that would keep the site a hospital and that depositions of city officials in the legal case are made public.

It’s unclear whether Mayor Dawn Zimmer has agreed to the stipulations, but sources say the city can not afford to pay the additional costs. The city has already agreed to forgo millions in payments owed to them by the hospital.

If a settlement is not reached, the creditors are expected to issue formal objections to the sale later today. The filings are expected to include information gleamed from depositions and emails.

An investment group that owns the Bayonne Medical Center wants to purchase the hospital for $65 million and turn it into a for-profit facility. Most of the proceeds of the sale will go to pay off $52 million in bonds.

The events leading up to the bankruptcy and the sale have come under scrutiny in recent weeks as the hospital’s former attorney — Donald Scarinci, of Scarinci & Hollenbeck — accused the city of forcing the hospital into bankruptcy.

State Sen. Loretta Weinberg (D-Bergen) has asked the U.S. Attorney’s Office and the state Attorney General’s Office to investigate Scarinci’s allegations before the state approves a transfer of the hospital’s license.

A lawyer with the Hoboken Hospital Authority says critics are purposefully mischaracterizing the events leading up to the bankruptcy.

“Advice apparently was given to the hospital that it had an unlimited source of funding from the Authority and from the city.” attorney Ken Rosen said in an email.

“When the Authority members discovered the extent of the Hospital's losses, they directed that the hospital live within its budget. They directed that the hospital take appropriate measures to assure that expenses did not exceed revenue.”